We’re now on the 4th installment of this series, I hope you are enjoying it so far!
This next post will cover how to save the many thousands of dollars you’ll need for your career break adventure. To get the conversation started, here is a table that will simplify the discussion.
| Income | ||||||||
| Gross | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | |
| Net | $34,038 | $41,113 | $47,998 | $54,860 | $61,514 | $67,429 | $73,088 | |
| Less Deductions | $31,723 | $38,165 | $45,046 | $51,931 | $58,443 | $64,415 | $70,074 | |
| Savings Rate | 10% | $3,172 | $3,816 | $4,505 | $5,193 | $5,844 | $6,441 | $7,007 |
| 15% | $4,758 | $5,725 | $6,757 | $7,790 | $8,766 | $9,662 | $10,511 | |
| 20% | $6,345 | $7,633 | $9,009 | $10,386 | $11,689 | $12,883 | $14,015 | |
| 25% | $7,931 | $9,541 | $11,261 | $12,983 | $14,611 | $16,104 | $17,518 | |
| 30% | $9,517 | $11,449 | $13,514 | $15,579 | $17,533 | $19,324 | $21,022 | |
| 35% | $11,103 | $13,358 | $15,766 | $18,176 | $20,455 | $22,545 | $24,526 | |
| 40% | $12,689 | $15,266 | $18,018 | $20,772 | $23,377 | $25,766 | $28,030 | |
| 45% | $14,275 | $17,174 | $20,271 | $23,369 | $26,299 | $28,987 | $31,533 | |
| 50% | $15,861 | $19,082 | $22,523 | $25,965 | $29,222 | $32,207 | $35,037 | |
| 55% | $17,448 | $20,991 | $24,775 | $28,562 | $32,144 | $35,428 | $38,541 | |
| 60% | $19,034 | $22,899 | $27,027 | $31,158 | $35,066 | $38,649 | $42,044 | |
*This table uses the Ontario provincial tax rate and 2012 tax year
Hopefully you aren’t too confused yet! This table shows how much you can save depending on your income and your savings rate in one year. We start with your gross pay, deduct taxes then deduct Canadian Pension Plan (CPP) and Employment Insurance (EI) payments. The “Less Deductions” row shows you what your actual take home pay will be for one year.
Are you from a different Canadian province or another country? Use the same structure and plug in your own numbers!
This table is also useful for figuring out how long you’ll need to save for other purchases like a house, car, or education. You can also use it to see how much you can put towards debt repayment. For the sake of this article though, we’re talking about traveling and experiencing the world!
In my last post on this subject we came up with a few scenarios for different types of trips and levels of comfort & accommodation.
A young volunteer and an intrepid couple
The first scenario involved a young traveler who wanted to volunteer for 2 months in a South American country and lead a modest lifestyle. I had come up with a rough guide of $5,700 to do this. If this person earned let’s say $40,000 per year and could achieve a 20% savings rate, they could save enough money for their trip in 1 year! If they were really focused on their saving (maybe they still live with their parents), they could cut that time down by half or more.
Cover Your Adventure: choose the plan to suit your sport or activity
Another example I discussed involved a married couple who wanted to travel to European, Asian and South American destinations for 4 months. I estimated a trip cost of $24,000 for this. If the couple has two incomes, they could save the money necessary in 6 months by keeping expenses low. If only one spouse is working it would obviously take longer.
What if you are in your 40’s or 50’s with kids? This table will still apply, just come up with your own estimate and consult (or expand) the salary range!
Related: How to Travel Long Term and Experience the World – Planning & Budgeting
Visualize your financial situation and goals
Saving for a trip (or house, car, education, etc) is much easier when you can visualize the path ahead and have some concrete numbers in front of you. Consulting a table like the one I put together will show you how a salary increase or promotion may affect your saving ability. More importantly, the table shows how reducing your expenses and increasing your savings rate will help you reach your goal sooner.
While very few of us will be making $100,000 and living with our parents in order to achieve a high savings rate, we can make the commitment to live well within our means and reap the financial benefits.
I really like the solid facts here and the table is useful for anyone saving for anything, not just travel! Travel can be cheap but can also throw huge curveballs so it pays to be prepared.